Bessent warns that issuing more short-term bonds to avoid long-term market pressure creates risks for money market liquidity.
“While this buys time for that segment of the market, it requires the government to issue more shorter-term bonds, risking unintended consequences for the functioning of liquidity markets,”
Treasury buybacks should be limited to small scheduled operations for illiquid bonds, never emergency responses to rising yields.
“Return buybacks to their stated purpose: small, scheduled, off-the-run liquidity operations announced at quarterly refundings, never off-cycle responses to yield levels. Term out the debt honestly and pay the price the market sets,”